2019: A Year of Market “Roaring Lion” and Hushed Politics
When 2019 rolled out, the headlines looked like a bad reality‑TV drama—slow global economies, a raging US‑China trade brawl, a contentious Brexit saga, and even a presidential impeachment duel. The press painted a bleak canvas, and the markets seemed to waver like a surfer on a rough tide.
But the Bottom Line? It Was Pretty Sweet
- S&P 500 waltzed up 31.3% overall
- Straits Times Index (STI) took a modest 10.4% sprint
- FTSE World Government Bond Index (WGBI) even earned a tidy 5.9% interest
Those numbers feel like a quick win in a long marathon—you can almost shrug off the doubts and say, “Eh, we made money.” But 2020? It wasn’t going to be a laid‑back beach day. Political tension would stay on the agenda and the economy was set to keep doing its own version of the twist.
What Did 2018‑2019 Teach Us About Risk?
To survive the inevitable short‑term bumps, investors need to consider risk as a sidekick—partnering with returns not as a backup plan but as an essential co‑pilot.
Mountains of Worries, Rocksolids of Returns
Geopolitical drama—US‑China trade war, Brexit, that whole she‑bang—lasted the whole year. Yet, all assets pretty much dodged a slump, except for certain currency comparisons like USD vs. SGD or MYR, which dipped a tad.
Highlights of the Year
- US tech stocks? 49.9% applause‑worthy performance.
- Singapore equities? 10.4% steady, no high‑speed thrills.
- General portfolios? 14.3% to 31.3%, depending on the risk appetite you picked.
The MSCI World Equity Index and S&P 500 were sitting on last year’s highs when it closed—proof that central bank swoops (like easy‑money policy) kept markets cheery.
Economically, the US and global GDP were trimming like a slow‑moving treadmill, sparking the media to predict a recession. But this year’s central banks—including the Fed—have stayed ready to bankroll the economy as needed.
What to Do Next? Keep Your Tongue in the Drive‑Belt
Short‑term turbulence is inevitable. The trick? Treat every dip as a chance to add a little more to your portfolio’s security cushion. Stay patient, keep your strategy on track, and remember: the markets are a roller‑coaster that rewards those who ride the ride rather than those who panic at every void.
Figure 1: Asset class performance in 2019 (in USD)
Let’s Not Forget 2018’s Wild Ride
When 2019 burst onto the scene with a roaring boom, it’s easy to gloss over the chaos that unfolded a year earlier. In 2018, the U.S. tech sector took a huge nosedive—drop almost 25% from its peak—before clawing its way back up by year‑end 2019.
Tech Tumbles of 2018
Picture a roller‑coaster that went from soaring high to plummeting low in a matter of months. That’s exactly what tech stocks did in 2018. If you let your emotions run wild, you might have tossed out your positions during the slump and missed the extraordinary 49.9% rally that finished 2019.
What Would You Have Done?
- Hold onto the shares—patience pays off.
- Sell out of fear—redeye many missed out on the rally.
- Jump in later—maybe reap some gains, but not the full return.
Patience Pays Off
Those who weathered the lows stayed in the game and secured the biggest wins. “Time in the market beats timing the market,” the saying goes, and the data proved it.
Looking Ahead: 2020’s Risk Factors
To earn the top spot in the market’s leaderboard, you must roll with the punches. 2020 could bring spikes in volatility fueled by:
Political Turbulence
- U.S. general election & its ripple effects on trade.
- Trump’s impeachment saga (though not as impactful as the election).
- Brexit’s full‑stop showdown.
- U.S.–Iran tension—or its resolution.
What to Do?
When headlines scream instability, stay calm. Keep your strategy on track and hold your foot on the lever—don’t let media noise change your long‑term plan.
The Global Economic Landscape
Stabilizing Markets
We recently shifted client portfolios to an All‑Weather approach for non‑U.S. assets, anticipating higher uncertainties outside the U.S. Market indicators now suggest a softening of volatility overseas, and we’ll tweak allocations as the economy evolves.
U.S. Growth Slowdown
The U.S. economy’s growth decelerated in 2019—LEI slid from 3.5% to 0.1% YoY—but no recession on the horizon. Corporate earnings held up, and the Fed is ready to cut rates if required—all signs of a steady trajectory.
China’s Recovery
China’s economic engine is turning around. The Li Keqiang Index surged from 6% to 7.4%, and industrial output plus retail sales also climbed. A low P/E of 14.3x suggests room for growth assets.
Emerging Market Implications
China’s rebound is a bellwether for emerging markets. A healthy Chinese economy means better earnings prospects for the rest of Asia ex‑Japan, and for emerging markets as a whole.
Preparing for Volatility: Risk Management
Instead of reacting to every buzz, evaluate whether the risk you take is worth the return. By comparing 2019 returns against the maximum drawdowns seen in 2018, we find a clear relationship: higher risk, higher payout—when measured over the market’s long run.
Stick to your plan, stay invested, and let the markets continue their dance. After all, the only time you should bail is when fundamentals shift—not whenever headlines shout a sudden spike.
Figure 2: Maximum drawdowns of asset classes in 2018
Figure 3: Ratio of 2019 returns to maximum drawdowns in 2018
When the Market Throws a Party, Do You Know How to Dance?
Picture this: the U.S. energy sector was bragging about a 11.7% return in 2019. But it fell 30% from its 2018 high—so far behind, actually. If you split the numbers, that’s a 0.39x return‑to‑risk ratio. Think of it like this: for every 10% wobble you’d get, you’d only scoot 3.9% forward.
Singapore Corporate Bonds: The Sweet Spot
Ready for a brain‑ticking snap? Singapore’s investment‑grade bonds boast a 5.3x return‑to‑risk ratio. U.S. bonds aren’t far behind at 3.1x. Basically, for every 10% risk bite, you’re munching on a sweet 53% and 31% repercussion.
Our Dream Team: Portfolios With More Spin
- 36% StashAway Risk Index (SRI) portfolios delivered a 1.6x ratio.
- 12% SRI ones danced up to a 2.5x ratio between 2018–2019.
High Returns? Are You Sure It’s Worth It?
Just because something feels shiny doesn’t mean the risk you’re taking is properly rewarded. Some high‑return assets still had low ratios—a red flag for the risk‑hungry investor.
Risk‑Managed Investing: The Long‑Game
The trick is to keep your return‑to‑risk ratio steady no matter what economic twisty turns throw at you. Our algorithm recalibrates your holdings as the climate shifts—minimizing the risk, maximizing the upside. Think of it as a safety harness for the rollercoaster of markets.
Closing Musings
- Risk management beats market timing—unless you’re a master of fortune telling, that is.
- We’re not crystal‑ball‑sorters; 2018 and 2019 prove you can’t predict with confidence.
- Your fundamental focus—not spikes—keeps you sane.
- Our ERAA® framework spotlights economic cycles so you can dodge the short‑term jag‑jags.
- Stay calm, don’t panic—invest systematically.
- Don’t chase day‑trading; be a long‑term investor, like a plant, not a quick‑hit.
Let’s see you stand firm, not shake up like a shaken soda. That’s how you’ll ride the natural upward curve of markets for real.
—StashAway Original
